Okay. Good afternoon, everyone.

Welcome to Chroma's second quarter 2026 earnings conference. This is Jennifer and I will be your host for today's sessions.

As we held an onsite conference before this call, today's sessions will primarily focus on Q&A. I will begin with the remarks from our former CFO, Paul Ying, and followed by the presentation of the second quarter financial results by our new CFO, Lawrence Wu.

After the financial updates, I will provide an overview of this quarter's product mix, followed by the question-and-answer sessions. All presentation material are available for download from the company website, and with that, I will now turn the call over to our CFO, Paul Ying.

Thank you, Jennifer, and all my old friends from the investor sectors. Time flies.

Today will be my last time to step in here to talk with you. Starting from tomorrow, I will be retired from Chroma.

Thank you for all your support and all your concentration and attentions to Chroma. Please keep on.

With the very amazing and great record-breaking records for the second quarter of 2026, let me introduce our new CFO, Lawrence, to present to you. Thank you.

Hi, everyone. Good afternoon.

My name is Lawrence. I'll be in charge as new CFO of Chroma, which is a pretty big challenge.

Let's brief the second quarter results for everybody. First, second quarter consolidated revenue reached 13.53 billion, up to 40% quarter-over-quarter and 110% year-over-year, making another record-high quarter.

Gross profit was 8.19 billion with a gross margin of 61%. Compared with 63% in the first quarter, the decline was mainly due to the short-term higher cost of key components, including DRAM, passive components, and ICs.

We remain focused on maintaining a stable margin profile, and might be considering a price adjustment if necessary. Operating income was 5.24 billion with operating margin of 39%, representing a 139% growth year-to-over-year.

Non-operating income totaled 1.27 billion, driven by gains from the disposal of ADLINK shares and employee housing assets. Net income to shareholders reached 5.12 billion, up to 162% year-over-year, while EPS was 12.15, both record highs.

Secondly, the first half of the 2026 performance: for the first half of 2026, consolidated revenue was 25.39 billion, up to 91% year-over-year, which represents almost doubling growth. The gross profit was totaled 15.61 billion with a gross margin of 61%.

Operating income was 10 billion, which represents tremendous 130% year-over-year growth. Net income to shareholders reached almost 9 billion, up to 120%, and EPS was 21.27.

Overall, earnings continue to grow faster than revenue, reflecting strong operating leverage and improved efficiency. Lastly, the financial position and cash flow: as of June 30th, 2026, Chroma maintained a solid financial position.

Cash and short-term investment totaled 13.68 billion, up to 65% from year-end 2025, while shareholders' equity reached 33.71 billion. The company remained in a net cash position.

Inventory was 11.58 billion, reflecting preparation for future demand. Inventory turnover days improved from 224 days to 177 days, indicating better inventory efficiency.

Annualized ROE reached 54% and ROA reached 32%. Operating cash flow for the first half was 5.35 billion with the major construction of our second manufacturing facility completed.

Capital expense are expected to moderate. As a result, free cash flow reached 3.29 billion, up to 86% year-over-year.

That's basically the financial performance of our second quarter and the first half of 2026, and I will turn over to Jennifer.

Okay. Thank you.

Please refer to slide 9 for details on our product mix for the second quarter. For the second quarter, the biggest driver of the growth still comes from the testing instruments and ATS section, which saw a remarkable increase of 14% quarter-over-quarter and 129% year-over-year.

This surge was mainly contributed from AI server power applications. Currently, the AI server power application has accounted for over, I would say, 60% of this power business.

The test instruments and ATS sales revenue for the first half already exceed total revenue in 2025. In addition to AI server powers, the battery cell project is ready to ship out from the third quarter.

For semiconductor sectors, which achieved revenue 4.4 billion in the second quarter, representing 29% growth quarter-over-quarter and doubled year-over-year, we do see the growth momentum from semiconductor sections is increase. The major growth driver were coming from system-level tester and photonics ranked by the sales revenue contribution.

The semiconductor and photonics will be the main contributions in the second half. We believe it will be outperforming the first half.

The driver are system-level tester from the AI, HPC, and ASIC, and photonics is mainly contributed from the optical communication and CPO. As of today, we already received the PO for the insertion 3 and insertion 4.0, which start to contribute from the second half of this year.

Now we could move on to Q&A section.

Hi, thank you, Paul, Jennifer, and congrats on your new role, Lawrence. I have questions about different segments.

Can you talk a little bit about your shipment progress for HVDC-related power testers?

This would be the first questions, right?

Yeah.

Actually, as you may read from our first half results, we deliver this AI power, I would say, almost every month. You see maybe I would say every month the shipment is pretty much the same based on the sales revenue.

I see. I guess the testers for HVDC power rack could be different versus the testers for all these power components like PSU you shipped over the past few months.

There's no difference between 400V and 800V.

Right. Do you mean that you already started mass shipments for both 400V and 800V HVDC power testers?

You could say that, right from day one. You just need to consider conversion doesn't mean the shipment.

We could ship to our customers, how they conversion, that's you need to ask our customer. Sure,

sure. Is there a trend like you see the orders of this HVDC power tester become stronger month-by-month, or yeah, cuz recently there's a rumors saying there's a delay of the HVDC power rack.

Delta just hold their call, they said the production will start, but in small volume. I'm just wondering on the tester side, in which quarter would you see large volume pick up for your testers?

The issue is every quarter is pretty much the same. It's never much trending up or trending down.

Yeah. I see.

I see. How about the order momentum?

I'm not talking about your shipment, the order.

They already block off the whole year. Oh,

I see. Okay.

Is there they give you order for full year, and do they adjust every quarter?

They didn't adjust. They just keep pushing us

to

speed up the delivery. Why I really don't understand how this related to how fast converting to their product shipment.

We actually deliver to all our customers almost every month.

I see.

Since the pattern is pretty much the same, I really couldn't highlight, okay, which quarter is strong, which quarter is low.

I see. I think in the second half last year, when we talk about your ATS test or your power tester, you mentioned that there's some capacity constraints, like you can't fulfill the order.

How about the situation now?

Beginning of this year, our phase two already ready, it's start ramping up. Last year, our phase two fab was not ready.

I see. I see.

Got it. Second question is about your ESS testers.

I know this kind of project tends to bring lumpiness to your quarterly revenue. I understand in second quarter, there's one or two months that includes ESS battery revenue.

How about the rest of the year?

May not be similar pattern as last time. This is because we do see the battery cell demands continue to increase.

It's very hard for me to give you this kind of a guidance saying will be certain locate at which month. You will see, and very soon.

Do you mean you got a new order or it's the same order?

I say increase, that mean demand is continue to increase, the order is piling up. It's more than we got in the beginning of the year.

I see. The last question is about the semi testers.

In your remarks, you said the semi momentum increase, including SLT and photonics. When you say momentum increase, do you mean versus 3 months ago, comparing to your initial expectation, it grow, or you mean quarter-over-quarter it grow?

Okay. I'm sure you will build out the model of Chroma, and then you definitely will notice that semiconductor growth rate in the first quarter versus second quarter, actually second quarter, this kind of growth rate is increase.

Then we do see this momentum is continue to increase in the second half. We even give you a guidance that the second half will be outperforming first half.

This is very clear guidance, based on equipment vendor.

I see. Okay.

Thank you. That's all my questions.

Yeah. Thank you.

Sorry, just one more follow-up question about the CPO. I just want to get some update versus 3 months ago.

You said you have PO for insertion 3 and insertion 4. Any difference versus 3 months ago?

Three months ago. Let me think about 3 months ago.

We do see the order size is bigger.

The order size is for this year or it's rolling 12 months?

No, this year. Because CPO is very complicated in testing.

I can tell you so far customers only place order up to 4.0, not yet really rolling up to after 4.0. I would say CPO is very, very challenging technology, and we do see due to its complexity and then the units do revise up.

I see.

Cuz

over the past 2 months, there's also concerns on the market about the ramp-up of CPO. I know one of that is on the testing side, and there's a lot of challenges in the manufacturing.

You're saying that because of these difficulties, customer actually increase the order on your side?

Yeah. We already received the PO.

PO is, I would say, the best reference to prove this is actually ongoing project.

Do you see other competitors in insertion 3 and insertion 4?

Insertion 4.0 is 100% initiated by Chroma. There's no competitor.

Insertion 3, we already mentioned before we joined, there's actually existing peers.

I see. Okay.

You're competing with the existing peers.

Yeah. I don't think we compete.

We actually have a better performance.

I see. The PO is coming from a single customer or you have other customers under engagement?

Currently, if you talk about CPO, we do have NV and Marvell. Marvell is not yet ramped, I think.

Okay. Cool.

Understood.

Maybe last Actually adopting different technology, and design's different.

Okay. You are also involved in design for their testers?

What do you mean by design their tester? We actually design the tester is 100% our own technology.

Okay. I see.

Maybe last question is about your FT handler for AI chips. I think you showed the product in the beginning of this year.

What's the progress on that tester? All

doing so well. This is the first time we don't need to do debug.

I'm sure next customer will adopt. Yeah.

Okay. I see.

That's very clear. Thank you.

Thank you.

Hi.

Hi, Jennifer. Thank you for taking my question.

I'm very glad to hear that semiconductor segment is going to see very strong momentum in the second half. Just want to shift the gear a bit to AT&S.

Do you also expect this kind of growth momentum? Is it fair for us to also kind of expect this segment to grow half-over-half in the second half?

Are you asking about the mature node? Which part?

I think the AT&S overall segment. Oh,

you mean power business? Yes,

yes.

Sorry, we don't provide this kind of guidance.

Because

we already give a very clear indication regarding to semiconductors, and I already said that every month there's not very much difference about the shipment of the power business.

That's very clear. Thank you.

Thank you.

Hi, Jerry.

Thank you. Hi Jennifer, Lawrence, and Paul.

Thank you for taking my question. On the semi, mature or legacy semi testing tools, can you give us an update, yeah, on this one?

Because I think earlier in the year, I think you're more conservative on this, but seems like the demand is turning stronger at some of your customers. I'm just wondering how should we think about your mature testing business in the second half of this year.

We do see

initially our guidance regarding to the legacy FT is flat compared to last year. We do see the demands is increase, especially started from the second quarter.

We guess this is because some of the legacy makers are shifting their business to high-end AI application related, and which is we do see a newcomer want to take over the traditional legacy parts. Since they are newcomer, they need to buy new tools.

I do actually see maybe legacy start to increase by maybe 10% or 20%. I think should be not be affected.

Oh,

for this year?

Yep.

Okay.

Maybe first quarter was slow, but second quarter, actually, no matter compared to first quarter or compared to last year second quarter, it's actually better.

Thank you. Then on the final test handler business, understanding that you're doing pretty well, and then just wondering when should we expect this business to see more meaningful revenue contribution?

I'm sure it should be from this year. If you talk about large ramped, maybe next year.

Take a chance.

Got it. Then lastly, I think on the component cost increase that it's a headwind for your gross margin.

I think Lawrence earlier mentioned that you're considering to raise the price. Is there a timeline that we should think the price hike should become effective?

Will this be second half this year, or it will be next year?

I will let Lawrence comment on that.

Price increasing, it's by product actually. It could be this year, very likely, yeah, for price adjustment of 10%, maybe.

Got it. Thank you.

Just maybe, but it's going to be this year.

Basically, we couldn't pass on the cost for the current immediate price increase, especially we need to prepare the material by carry forward. For the next product, of course, we definitely can be reflect.

Especially for the new products.

Yep.

Very clear. Thank you.

Thank you.

Thank you for squeezing my last question. I want to ask about the testing time for SLT.

Now you've mass shipped the SLT for MI450 and for Vera Rubin, I'm wondering if the testing time becomes longer versus before. I know when you ship for Blackwell, the testing time actually increased after the mass production.

I'm just wondering if there's a similar pattern here. Oh,

hi, Alex. Yes, that's what I comments before, because MI300 is actually very challenge, very high power density, which is equivalent to power density of 300W.

Actually, initially, customer's target ideally is the 4 hours, but now is running between 6 to 8 hours. Recently, they actually revise up the orders units by, I would say, 70%, almost double.

Since we already start to ship this MI300, so that is why we know the cycle time is increase. The revising up will start to deliver from the third quarter.

Then as you could see, we also got the CSP is coming out in the fourth quarter and across to next year. Then I think recently we also got the customer's new CPU.

We do see the CPU demands will continue to increase, and we do have exposure to CPU.

Interesting. For you said testing time 6 to 8 hours, that's just the SLT or including burn-in?

No. No burn-in, just system-level tester.

Okay.

You need to understand because AMD is chiplets, it's very large panel size. Yeah.

When you say CPU, it's referring to both AMD and NVIDIA or just one of them?

We also cover Google CPU,

so. Three?

The things I want to emphasize here is we already could do and good at dealing with the CPU.

I see. I assume the SLT for CPU is kind of a relatively new business for Chroma for next 12 months?

Yeah. Of course.

Yes. Cool.

That's very clear. Thank you.

Thank you.

Okay.

Thank you.